SA Affordable Housing March - April 2020 // ISSUE: 81 | Page 30

LEGAL MATTERS
SPONSORED BY STBB
Charging developers for
installation of services:
A new approach
By Maryna Botha
Municipalities’ revenue collection increasingly poses
challenges, partly because collection systems are not
uniform and transparent, and also because financial
management systems remain weak, as evidenced by
the R130-billion owed to municipalities for services.
T
he issue of development charges has been under
discussion for well over a decade in municipal
infrastructure and finance policy circles. The
approach across municipalities varies substantially and
National Treasury indicated that it believes that this
undermines the scope of municipalities to legitimately
use development charges to secure direct
development revenue from expenses incurred.
To this end, the Municipal Fiscal Powers and Functions
Amendment Bill was released on 8 January 2020 for
public comment. The purpose of the Amendment Bill,
among other things, is to uniformly regulate the power
of municipalities to levy development charges on
landowners, to provide for policies and by-laws that will
give effect to policies on the development charges, to
establish an entitlement on the part of municipalities to
withhold other approvals or clearances due to non-
payment of development charges, and to provide for
engineering services agreements.
The Bill thus seeks to give local governments the
power to levy development charges in a consistent way,
using a fixed structure and to collect revenue from
property developers for the costs incurred by the
municipality when installing new infrastructure or
upgrading existing infrastructure in new land
development projects. This increases predictability of
development charge revenue and should, Treasury
states in its explanatory Memorandum, benefit both
municipalities and developers.
In terms of the Spatial Planning and Land Use
Management Act 16 of 2013 (SPLUMA), municipalities
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have the power to impose such conditions as are
determined by the Municipal Planning Tribunal prior to
the approval of a land development application. One such
condition is the payment of a development charge. The
power to impose this condition appears to have been
formalised by the Bill.
KEY AMENDMENTS INCLUDE, AMONG OTHERS:
A CONDITION OF APPROVING A LAND
DEVELOPMENT APPLICATION:
The development charges are a once-off charge levied by
a municipality on a landowner as a condition for
approving a land development application and are
destined to cover the costs incurred by the municipality
for the installation of new infrastructure or upgrading of
existing infrastructure for a proposed development.
A municipality may withhold any approval or clearance,
including a rates clearance certificate, if a development
charge owed or payable has not been paid or the
landowner has failed to install external engineering
services in accordance with the conditions of approval or
an engineering services agreement. The payment for
development charges can be made either as a monetary
contribution or an in-kind payment where the landowner
installs infrastructure on behalf of the municipality.
BENEFICIARIES CARRY THE COST:
The National Treasury states in its explanatory
Memorandum that the benefits of levying development
charges ensure that infrastructure required to service
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